It was only a couple months ago that North Dakota legislative leaders were soliciting input from citizens about the best use of the millions in earnings generated by the state’s Legacy Fund, but with the onset of the Coronavirus pandemic and an oil price war, “all bets are off.”
That’s the assessment of House Majority Leader Chet Pollert, R-Carrington, who chairs an interim legislative committee charged with coming up with ways to either spend the earnings or reinvest them.
“Things can turn around quickly, but I’m not counting on it,” Pollert said. “We may have to again look at plugging holes in the state budget with those dollars.”
North Dakota voters in 2010 established the Legacy Fund, the state’s oil tax trust fund. Thirty percent of all oil tax revenue collected by the state is deposited in the Legacy Fund, and prior to the economic downturn, the fund’s investments had been generating hundreds of millions of dollars of earnings. The ballot measure that established the fund required all earnings to be reinvested the first seven years of its existence. But for the first time at the end of the 2017-19 biennium, the Legacy Fund’s earnings for the two years – a total of $454 million – were transferred to the state general fund.
The 2019 Legislature devoted most of the cash to patching up the state’s budget and replenishing the Budget Stabilization Fund, the state’s “rainy day” fund which was depleted during the 2017 session following the slump in oil prices. But with the state restored to relatively good financial shape, citizens and policy makers had begun to debate how to use the earnings from the now nearly $7 billion fund.
Among possible uses, the language that established the study committee suggested members consider tax relief, reinvestment, research and technology, and promoting workforce development and career and technical education. The spread of the virus has put those wish lists on hold for now, but one day conditions will improve, so conversations will continue behind the scenes.
Several ideas for use of the earnings were floated during the 2019 session, but all were rejected. One plan would have reinvested the earnings. Figures presented by Rep. Corey Mock, D-Grand Forks, showed that if all earnings were reinvested for the next 40 years, the Legacy Fund would grow to $143 billion. Also rejected was an idea proposed by Rep. Craig Headland, R-Montpelier, that would have used Legacy Fund earnings to reduce personal and corporate income taxes, possibly eliminating them altogether within 10 years.
Senate Majority Leader Rich Wardner, R-Dickinson, has pitched several ideas. Wardner would like to devote 25 percent of Legacy earnings to the state’s Highway Trust Fund, which he said would fend off a need to raise the state’s motor fuel tax.
“It’s going to keep taxes down and we’re going to raise the quality of life because we won’t kill as many people on the highways,” he said.
Wardner would also like to see earnings used to help meet school construction needs. He said his priority is schools in the oil patch that are struggling to cope with enrollment increases attributable to growth in the oil industry.
The Legacy Fund Earnings Committee will meet twice more prior to the 2021 legislative session. Chairman Pollert expects the next meeting will occur in late June or early July.